Medco 2014 Annual Report Download - page 43

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Express Scripts 2014 Annual Report
PBM OPERATING INCOME
Year Ended December 31,
(in millions) 2014 2013 2012(1)
Productrevenues:
Networkrevenues(2) $58,468.6 $63,244.4 $57,765.5
Homedeliveryandspecialtyrevenues(3) 38,633.0 37,571.1 32,807.6
Servicerevenues 1,278.0 966.2 749.1
TotalPBMrevenues 98,379.6 101,781.7 91,322.2
CostofPBMrevenues(2) 90,630.8 93,803.5 84,259.9
PBMgrossprofit 7,748.8 7,978.2 7,062.3
PBMSG&A 4,202.4 4,479.3 4,260.7
PBMoperatingincome $3,546.4 $3,498.9 $2,801.6
Claims
Network—continuingoperations 933.6 1,065.3 1,020.7
Homedeliveryandspecialty—continuingoperations(3) 127.7 139.7 125.8
TotalPBMclaims—continuingoperations 1,061.3 1,205.0 1,146.5
TotaladjustedPBMclaims—continuingoperations(4) 1,309.0 1,476.5 1,390.7
Homedeliveryandspecialty—discontinuedoperations — 0.4 0.4
TotalPBMclaims—discontinuedoperations — 0.4 0.4
TotaladjustedPBMclaims—discontinuedoperations(4) — 0.4 0.4
(1) IncludestheacquisitionofMedcoeffectiveApril2,2012.
(2) Includesretailpharmacyco-paymentsof$10,272.7,$12,620.3and$11,668.6fortheyearsendedDecember31,2014,
2013and2012,respectively.
(3) IncludeshomedeliveryandspecialtyclaimsincludingdrugswedistributetootherPBMs’clientsunderlimited
distributioncontractswithpharmaceuticalmanufacturersandFreedomFPclaims.
(4) Totaladjustedclaimsreflecthomedeliveryclaimsmultipliedby3,ashomedeliveryclaimstypicallycoveratime
period3timeslongerthannetworkclaims.
PBM RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2014 vs. 2013
Networkrevenuesdecreased$4,775.8million,or7.6%,in2014from2013.Thisdecreaserelatesprimarilyto
lowerclaimsvolumeandrelatedrevenuesofapproximately$5,783.5millionduetothetransitionofUnitedHealthGroupin
2013.Thisdecreaseisalsoduetoanincreaseinthegenericfillrateandlowerclaimsvolumeingeneral,partiallyoffsetby
inflationonbrandeddrugs.Ournetworkgenericfillrateincreasedto83.7%oftotalnetworkclaimsin2014ascomparedto
81.6%in2013.
Homedeliveryandspecialtyrevenuesincreased$1,061.9million,or2.8%,in2014from2013.Thisincrease
relatesprimarilytoinflationonbrandeddrugs,partiallyoffsetbylowerclaimsvolumeandrelatedrevenuesofapproximately
$670.5millionduetothetransitionofUnitedHealthGroupin2013.Inaddition,thisincreaseispartiallyoffsetbyanincrease
inthehomedeliverygenericfillrateandlowerclaimsvolumeingeneral.Ourhomedeliverygenericfillrateincreasedto
77.2%ofhomedeliveryclaimsin2014ascomparedto74.6%in2013.
CostofPBMrevenuesdecreased$3,172.7million,or3.4%,in2014from2013.Thisdecreaseisprimarilydueto
lowerclaimsvolumeandrelatedcostofrevenuesofapproximately$6,222.9millionduetothetransitionofUnitedHealth
Groupin2013.Inaddition,thisdecreaseisduetolowerclaimsvolumeingeneral,theimpactofbettermanagementof
ingredientcostsandtheimpactofanincreaseinthegenericfillrate,partiallyoffsetbyinflationonbrandeddrugs.
PBMgrossprofitdecreased$229.4million,or2.9%,in2014from2013.Thisdecreaseisprimarilyduetolower
claimsvolume,includingthetransitionofUnitedHealthGroupin2013,aswellas$462.3millionoftransactionandintegration
costsfor2014comparedto$238.3millionfor2013.Thesedecreasesarepartiallyoffsetbythesecondquarterrealizationof
$129.4millionofrevenuefortheyearendedDecember31,2014relatedtoaclientcontractascomparedto$108.2millionfor
theyearendedDecember31,2013,aswellasbettermanagementofingredientcostsandformularyandcostsavingsfromthe
increaseinthegenericfillrate.
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